Bad Credit Score: 3 Things That Can Mess Up a Good Credit Score

Beverly HarzogMarch 18th, 2015

There's nothing wrong with a good credit score. In fact, it's impressive. You probably get good terms on credit cards and good rates on car loans and mortgages. But guess what? If you kick your score up a notch and grasp the Holy Grail of the credit world — an excellent credit score — you'll get even better terms and rates.

Sometimes, credit scores take care of themselves if you pay your bills on time and don't max out your cards. You can move up the ladder slowly, but surely. To make sure nothing gets in your way, stay on top of three issues that can drag down a credit score.

Errors on Your Credit Report

The Federal Trade Commission (FTC) says that 25 percent of consumers have errors in their credit reports, and one out of every five erroneous reports has a mistake serious enough to cause the borrower to be denied credit or to pay a higher interest rate.

You can check your credit and see your Vantage Score for free, as often as you wish, at LendingTree, with no credit card required and no obligation on your part. Checking this every month provides another layer of oversight and could help you spot identity theft or fraud quickly.

You can also order one free annual credit report from each of the three major credit bureaus: Experian, Equifax, and TransUnion at AnnualCreditReport.com. You can get your scores by paying a modest fee. To monitor your credit throughout the year, consider getting a free report every four months. For example, you get the Equifax report in January, the TransUnion report in April, and the Experian report in August.

There are some errors that won't ding your score, but there are some that certainly do. Let's say you always pay your bills on time, but you see that one of your reports shows that you've made a late payment. This type of error has a negative impact on your scores.

Okay, so what do you do next?

You write a letter to the credit bureau and point out the incorrect information.

Send copies of supporting documents and mail it as a certified letter so there's a record that the bureau received it. The bureau has 30 days to investigate it.

You also want to send a similar letter to the company that reported the false information. If the company determines that it is, indeed, an error, then they must tell the agency to correct or delete the information in question.

Spending Months Shopping for Rates

Credit score algorithms, in general, account for the fact that when consumers are looking for a mortgage or car loan, there may be multiple credit checks performed by lenders. This is called rate shopping, and as long as you do this in a short period of time, the FICO scoring treats all of these inquiries as though there's been just one inquiry. The tricky part is that newer versions of FICO combine inquiries within a 45 day period, but older versions may only provide a 14-day window. If you spread it out over, say, five months, then each inquiry could be counted as an inquiry and knock about five points off your score, depending on your credit profile.

You Paid Your Rent or Cell Phone Bill Late

In most cases, these payments are not reported to credit agencies and many consumers get away with paying these creditors late. It might surprise you to know that if you're very delinquent on your rent or cell phone bill, it could get reported to the bureaus. To be clear, you don't get credit for paying these everyday bills, such as rent, on time. But if you're very delinquent on one of these, there's the possibility it could be reported to a credit bureau. Your payment history is a staggering 35 percent of your FICO score, so late payments can bring your score down. Don't take chances that it won't be reported. Pay your bills on time. All of them.

Aren't Sure if You Have a Good Credit Score?

If you aren't sure what credit range you fall within, then check out LendingTree's free credit score. It's easy to access and you'll get a valuable overview of your current credit health.